The Competition and Markets Authority (CMA) announced an in-depth investigation into the deal after both companies failed to address concerns about the potential negative impacts of the merger, which the CMA warned against last month. 

The competition watchdog had previously cautioned that the proposed merger could result in higher prices and diminished service quality for mobile customers. With the launch of a Phase 2 probe, the CMA aims to delve deeper into these concerns surrounding the mega-merger.

In particular, the CMA expressed concerns that the merger could reduce competition by limiting the options available to mobile customers and potentially hindering smaller operators’ ability to negotiate favourable deals. This assessment prompted the launch of an in-depth Phase 2 probe into the merger’s implications.

Vodafone and Three initially unveiled the ambitious merger plans last summer, aiming to consolidate their UK operations into the country’s largest mobile network. The combined entity would boast approximately 27 million customers and over 11,500 employees, with Vodafone holding a majority stake of 51% in the merged business, while CK Hutchison, Three’s parent company, would own the remaining shares.

The CMA is worried that combining the two businesses will lead to reduced rivalry between mobile operators to win new customers, as competitive pressure can help to keep prices low and provide incentive for network operators to improve their services by investing in network quality.

Further, the regulator is concerned that the deal may make it difficult for smaller mobile “virtual” network operators, such as Sky Mobile, Lebara, and Lyca Mobile, to negotiate good deals for their own customers by reducing the number of mobile network operators capable of hosting virtual networks.

Both Vodafone and Three reiterated their confidence in the transaction’s ability to foster stronger competition and deliver improved network quality, speed, and coverage.

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Vodafone and Three, commenting on the latest announcement, said: “This was an expected next step in the process and is in line with the timeframe for completion that we set out from the outset.

“Vodafone UK and Three UK remain confident that the transaction will drive stronger competition in the mobile sector and give customers and businesses a step-change in network quality, speed, and coverage from day one.”

“We will review the potential concerns raised by the CMA and look forward to continuing to engage constructively with them throughout the review.”